Structural Transformation Hindered By Segmented Capital Markets In Sub Saharan Africa

Abstract

The paper uses a three sectors dynamic general equilibrium modeling approach that incorporates segmented capital markets applying to the macroeconomic nature of the Sub Saharan Africa region. The main theoretical implication from the model is that the heterogenous saving decisions resulted from segmented capital markets in the Sub Saharan Africa region deters its structural transformation. The transition growth paths solved by dynamic programming for the segmented capital markets model and a control (non-segmented capital market) verify this result. Particularly, the existence of segmented capital markets in the Sub Saharan Africa region will cause manufacture sector to loss its competitiveness in attracting labor from the labor abundant sector, the agriculture sector.